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EXECUTIVE GUIDE

Customer Intimacy
as a Business Model

DEAN MCMANN
THE QUEST FOR "CUSTOMER INTIMACY"

How do you explain customer intimacy?

The clichéd use of the term customer intimacy has led


to its devaluation across all industries – both consumer
and B2B. Here are some examples of so-called customer
intimacy initiatives:

• reaching out to answer questions and complaints


using Twitter and Facebook  

• building an online community to help customers


buy more  

• training to help the sales team become more


consultative 

• online recommendations based on previous


shopping patterns 

• a voice of the consumer program which asks for


live feedback - built into the product itself 

• a voice message that says “your call is important to


us” 

• building customer experience scenarios with data


gathered through observation 

Each one of these initiatives has been tagged as a


customer intimacy initiative, which isn’t an accurate
reflection of what the phrase means at all.

©2011 McMann & Ransford. All Rights Reserved. 2 



DEFINING "CUSTOMER INTIMACY"

Customer intimacy, as originally defined by Michael


Treacy and Fred Wiersema in Customer Intimacy and
Other Value Disciplines was all about choosing a value
discipline – operational excellence, customer intimacy, or
product leadership - and aligning your entire operating
model to serve that discipline.

This is where the misuse of the phrase with today’s


jargon gets in the way.

Too often, customer intimacy is sold as customer


relationship management, or Social CRM, or even
product co-creation and crowd-sourcing. Many are
initiatives which listen to the voice of the customer –
usually in the form of negative comments or product
complaints, and then finding ways to mitigate the
negative response. Other initiatives, such as creating
campaigns on Facebook and Twitter or building an online
community to encourage marketing conversations,
may be called engagement.

Still others are looking to improve customer


experiences using surveys, feedback, and customer-
driven feedback. Even in B2B companies, customer
intimacy is often viewed as a sales initiative, as part of
the global account management process.

Wrong.

©2011 McMann & Ransford. All Rights Reserved. 3 



CUSTOMER INTIMACY IN ACTION

A recent post on the Economist blog suggests that despite


high labor costs and a strong euro, Germany is the
world’s largest goods exporter after China. This engine is
being driven by durable, focused businesses defined as
Mittelstand.

Business Week tells us these are “family-owned


companies with fewer than 500 employees and annual
sales of less than 50 million euros”— and, get this — they
employ over 70 percent of German workers and
contribute nearly half of the country's GDP. And in the
field of clean technology –in which Germany is a leader–
more than 75 percent of German cleantech companies fall
under this category.

The Germans themselves have been studying these


Hidden Champions for years. Academicians Bernd Venohr
and Klaus Meyer point out that while the same approach
has been observed in a handful of other firms around the
world, including the US, it is most pronounced in
Germany.

How do they do it? Again, the Economist:

Mittelständler have not only focused on sophisticated


niches that are hard to enter. They have thrown their
energies into building up ever more powerful defences.
They constantly innovate to stay ahead of potential rivals.
They are relentless about customer service. Their
salespeople are passionate about their products, however
prosaic, and dogged in their determination to open up

©2011 McMann & Ransford. All Rights Reserved. 4 



new markets… [They] typically have subsidiaries in 24
foreign countries, offering service and advice. Many
get the bulk of their revenues from service rather than
products. Hako, which makes cleaning equipment,
generates only 20% of its revenue from sales of its
machines.

In short, they are focused, service driven, customer


intimacy businesses.

Future growth for the U.S. lies in pursuing true customer


intimacy led by services or solutions. Some of our leading
enterprise-level companies have already made the
transformation.

©2011 McMann & Ransford. All Rights Reserved. 5 



ENTERPRISE LEVEL CUSTOMER INTIMACY

If we examine the remarkable success of GE Healthcare,


Xerox, HP, or IBM Global Services, you’ll find they follow
a customer intimacy business model.

Here’s how the large companies do it:

CASE STUDY #1: General Electric


Customer Intimacy: GE Healthcare's Jeff Terry
Jeff Terry is Managing Principal of GE Healthcare.
Here he talks about the challenges his organization
faced as they transitioned to a customer intimacy
business model.

CASE STUDY #2: Xerox


Customer Intimacy: Xerox vs. the Rest of the
Industry Watch these two advertisements from two
competitors in the same industry: Xerox and
Konica Minolta.

Both advertisements appeared on YouTube this


month, within the past week. And although the two
firms compete in the same space, their approaches
could not be more different.

CASE STUDY #3: HP


Customer Intimacy: HP's "Let's Do Amazing"

HP’s marketing campaign highlights the power of


solutions - to differentiate themselves with a
powerful, substantiated message.

©2011 McMann & Ransford. All Rights Reserved. 6 



CASE STUDY #4: IBM

Is IBM's Smarter Planet a True Solution™?


Find out how IBM goes beyond marketing platitudes
to create a campaign to change the world. Not only
is this a True Solution™, it's a game-changer for IBM
employees as well.

What’s common across these leading companies is


that they all view customer intimacy as a
business model.

©2011 McMann & Ransford. All Rights Reserved. 7 



CUSTOMER INTIMACY AS A BUSINESS MODEL

Companies must view customer intimacy as a


business model, not as a marketing or sales strategy,
but as a strategy which drives the entire business model.
Most companies under-invest in their transformation
efforts, and fail either while on the journey itself or even
before they begin.

Think through your own experience: who is your


trusted advisor to you? Who do you reach out to for
advice and help?

Usually it is someone that understands your problems and


issues and has proved themselves by providing impactful
solutions in the past. Remember, the goal is to
become an extension of your customers’
organization - to be treated as part of the body with

©2011 McMann & Ransford. All Rights Reserved. 8 



no anti-bodies seeking us out and trying to
exterminate us.

That happens when your business solutions address a


truly important business opportunity or correct a business
problem for your customer. Intimacy means actual
daily presence in the trenches, solving real
customer problems.

It is not the bundling of your product and services, it


is not adding professional services to implement your
service or even assist in product selection (although all
these are valuable and will be part of your offer
portfolio).

Many of the world's leading B2B companies view


customer intimacy as a sustainable business model.
They moved to the Customer Intimacy model at some
point in their business cycle - particularly when they
found that their innovation curve was no longer providing
a long period of price differentiation for new products or
product extensions.

Customer Intimacy is a journey of transformation.

©2011 McMann & Ransford. All Rights Reserved. 9 



CUSTOMER INTIMACY AS A JOURNEY

For well over a decade, McMann & Ransford has been


focused on helping companies make the shift to a
Customer Intimacy business model. Along the way, we
developed the Customer Intimacy Engine™ - a
blueprint for business model transformation:

In working with over forty companies over the past 17


years, we’ve discovered that the process can be described
as a phased journey:

• Start
• Form
• Commercialize
• Scale, and
• Dominate.

Let's introduce these phases now and examine them in


greater detail:

©2011 McMann & Ransford. All Rights Reserved. 10 



Phase 1: Start
As the name implies, this stage is about making the
difficult decision of embarking on the Customer Intimacy
Journey. Many business leaders underestimate the
difficulty inherent in this phase. Without proper planning
and buy-in, this is where many transformation programs
fail.

There must be enough true support around the need for


change, and this support must be identified or won and
kept every step of the way.

©2011 McMann & Ransford. All Rights Reserved. 11 



Phase 2: Form
As the name implies this stage is about forming a new
business. This phase also includes getting the companies’
leaders to change mindsets. There must be enough true
support around the need for the new business model and
selecting the leader of the effort, as well as selecting the
target focus - be it market, or product group, or customer
segment. This includes building the initial solution
portfolio for the target market, acquiring capabilities, the
right talent, and taking the solutions to market. Finally,
this phase includes protecting the transformation effort
from the rest of the organization.

©2011 McMann & Ransford. All Rights Reserved. 12 



Phase 3: Commercialize
You know you are in this stage when you can predict and
verify outcomes from the business unit. This phase
includes expanding the initial offerings into a robust
portfolio of solutions. It demonstrates the ability to pull
through products and harvest accounts - thereby
fundamentally changing the relationship those accounts
have with your business. Additional target markets can be
added during this phase. Finally, this phase begins to
change the market's perception of your brand and
abilities.

©2011 McMann & Ransford. All Rights Reserved. 13 



Phase 4: Scale
This phase extends the customer intimacy transformation
to the broader business. The unit must develop critical
mass and have completely adopted the skills necessary to
be effective in the new business model, and - this cannot
be over emphasized - all players must know their roles
and be able to adjust to customer situations. Unlike
traditional businesses - the person at the customer
makes the call - there is little time to call corporate and
gain approval. The full extent of the business model is
understood at this phase of the journey.

©2011 McMann & Ransford. All Rights Reserved. 14 



Phase 5: Dominate
This is the phase where the entire business operates in
the new model. This often requires reorganization and
final adjustments to the staff organizations that support
the business. Marketing is dedicated to the new solution
sets and key executives come from the new business and
management development comes through the new
business model.

©2011 McMann & Ransford. All Rights Reserved. 15 



ASSESSING CUSTOMER INTIMACY

A customer intimacy assessment can be done by


answering the following set of questions. Executives
should be familiar with the key milestones for each phase,
and, most importantly, they need to be as objective as
possible in order to come up with their next set of
actions.

Getting Started

• Does your organization understand that this is a


business model and not a sales technique? 
• Does the executive team understand what it takes
to be successful? 
• Do you have buy-in for the long term
transformation? 

Forming the Business

• Do you have ideas that are strictly applicable to the


niche (i.e. vertical market) you want to compete
in? 
• Do you have proof points to differentiate your
company? 
• Are you selling to the key executives in your target
market? 
• Can you upsell more solutions to the executives
you currently serve? 

Commercializing the Business

• Can you save disaffected accounts? 

©2011 McMann & Ransford. All Rights Reserved. 16 



• Do you add new accounts through idea-based
solutions? 
• Are you pulling through significant product deals? 
• Do you have a portfolio that touches several key
executives in the vertical? 
• Can you grow rapidly? 

Scaling the Business

• Do you have integrated verticals where key


accounts are run by a customer intimacy business
model? 
• Do you have large transactions sold without
traditional sales activity? 
• Have you eliminated some corporate cost by
leveraging solution teams to sell them? 

Dominating the Market

• Are you running the business in a new way? 


• Have you changed your performance metrics? 
• Are you still running to business models - old and
new? 
• Are you promoting customer intimacy leaders to
top leadership jobs? 

©2011 McMann & Ransford. All Rights Reserved. 17 



THE LESSON: CUSTOMER INTIMACY IS THE KEY

The lesson for us is this: Businesses that focus on


customer intimacy will create new opportunities in
this difficult business climate.

The German example shows us that it is possible to


compete globally, and to grow under the most difficult
conditions.

What is needed is to rethink that first decision of your


business - who is the customer, and how do we
serve them?

In 2011, your customer intimacy initiatives can make the


difference between success and struggling with the status
quo.

Here's to your success.

ABOUT DEAN

Dean McMann, the founder of McMann & Ransford, helps


leading companies make the transition to a customer
intimacy business model. His transformation blueprint has
been used by over 45 companies across 17 industries.

Contact Dean at dean@deanmcmann.com >>

©2011 McMann & Ransford. All Rights Reserved. 18 



ABOUT US

For over 17 years McMann & Ransford has helped


some of the world's leading B2B companies realize
the value of customer intimacy as a sustainable
business model. Our proven Customer Intimacy
Engine™ has served as the transformation blueprint
for over 45 companies across 17 industries,
including:

• Atos Origin.
• BMC Software
• Compaq.
• Dell
• Deloitte
• Ernst & Young
• Fujitsu
• General Electric
• Hitachi
• Hewlett Packard
• Honeywell
• IBM
• KPMG
• McKinsey & Company
• Microsoft
• Oracle
• PwC
• Xerox

©2011 McMann & Ransford. All Rights Reserved. 19